Listed telecoms group issues profit warning due to flat revenue results

KCOM Group, the Hull-based communications and IT services provider, has revealed that the outlook for the current financial year is “weaker than originally expected.”

The group said that this is due to the result of flat revenue in its Enterprise segment and ‘continued customer churn’ in the National Network Services (NNS) segment.

The performance of the group’s NNS segment has resulted in the Board’s decision to impair the carrying value of goodwill in NNS. A non-cash exceptional item of £32.2m will be recognised in the group’s upcoming interim results.

The Group’s Hull and East Yorkshire segment, which is the largest contributor to Group EBITDA, continues to perform in line with market expectations.

The group said that this good performance is expected to continue during the second half of the financial year, supported in part by the anticipated December launch of a new unlimited fibre broadband portfolio for consumer customers.

As a result, KCOM now expects EBITDA for the current financial year ending 31 March 2019 to be around 5% below current market expectations.

The group’s net debt at 30 September is £108.5m (30 September 2017: £67.8m, 31 March 2018: £62.6m). This includes a material permanent one-off working capital outflow, which is the cash impact of the decision, in order to drive down costs, to insource a managed service arrangement with a key partner, alongside the unwind of certain deferred revenue balances in the Group’s Enterprise segment.

The group expects net debt at 31 March to be around 10% higher than current market expectations.

KCOM will announce its interim results for the six months ending 30 September on Tuesday, 27 November.

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